Disagreements over how CFPB should be run slowing reform

Although both Ohio Senators agree that Richard Cordray was suited to direct the Consumer Financial Protection Bureau, their disagreement on how the bureau should be run highlights the political divide that has stymied financial regulatory reform.

On Thursday, Senate Democrats failed to garner enough Republican votes to secure the 60 needed for Cordray’s confirmation. Sen. Scott Brown (R-Mass.) was the only Republican to cross the party line while Sen. Olympia Snowe (R-Maine) voted present.

Sen. Rob Portman (R-Ohio), who called Cordray a “good public servant,” said that the CFPB’s vast power to limit consumer choices on everything from buying a first home to paying for a college education warranted “some common sense reforms.”

“Because the appointment of a director activates major new powers of the bureau to regulate everyday consumer transactions and Main Street businesses, I believed it was critical that these reforms occur before confirmation,” Portman said. “Despite my raising these concerns with the White House, they have been unwilling to engage with me or others to try to address them.”

Portman’s reforms have been echoed throughout the GOP base. The changes sought included a restructuring of the bureau so that a commission, rather than a director, would lead it and demands that its funding be subjected to the regular Congressional appropriation process.

Democrats, who refused to compromise on either issue, expressed outrage that the confirmation vote failed.

Sen. Sherrod Brown (D-Ohio), who chairs the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, called the vote “unprecedented” and claimed that Democrats had made “numerous compromises.”

Brown said that Cordray would have been a “consumer cop on the beat who is not at the beck and call of Wall Street,” yet was rejected by “a group of Washington politicians.”

James Thurston, an Ohio Bankers League spokesman, agreed that Cordray made a good candidate for the position.

“We think Rich Cordray would be a capable leader,” Thurston said. “He’s proven himself in state government here in Ohio but Senate Republicans and other policy makers and to be frank – us – still have some issues in the structure of the CFPB.”

The OBL’s issues included the resounding case against the lack of oversight over the bureau’s finances and the bureau’s single person director structure.

Cordray’s future as a consumer protection leader remains unclear. By law, President Obama is allowed to appoint federal officials while Congress is in recess. Unless the Senate approves the recess appointment by the end of the next Congressional session, Cordray would lose his position.